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SBP lowered its policy rate by 100bps and economists at Standard Chartered Bank now see the end-FY20 rate at 8% (9% prior) to account for this cut. USD/PKR is sitting at 158.900.

Key quotes

“The State Bank of Pakistan (SBP) lowered its policy rate 100bps to 8% on 15 May, in line with consensus expectations. We lower our end-FY20 (ending June 2020) forecast to 8% (9% prior) to account for this decision.” 

“Although we expected a further 200bps of rate cuts, we believed the next cut would come in July. SBP has said its cumulative easing of 525bps, since the crisis began, is the deepest of global central banks. We see further easing and maintain our end-FY21 forecast at 7%.”

“Against weaker domestic demand and the sharp drop in global oil prices, SBP sees inflation averaging at the ‘lower end’ of its 7-9% projection for FY21; we expect 6.6%.”